Global sales of Islamic bonds, known as sukuk, could reach US$10 billion (Dh36.7bn) in 2009 after picking up in the second half of the year, Standard Chartered said on Monday. That would mean a return to levels last seen in 2005, when new issuances reached $10.76bn according to Islamic Finance Information Service (IFIS). In the first three months of 2009, new issuances stood at $1.8bn, one third less than in the year-earlier period. "We expect a pick-up in the next six months based on conversations with our customers," Afaq Khan, chief executive officer at Standard & Chartered's Islamic banking unit Saadiq, told reporters. Mr Khan said he was optimistic about the market following the recent $650 million issuance of an international dollar sukuk by the Indonesian government, which was seven times oversubscribed, with large demand from GCC investors. Recent Asian issuances of sovereign sukuk "could allow activity to fully rebound in the medium term," Moody's, the ratings agency, said in a report last week. In compliance with Shariah, sukuk pay investors in form of asset returns instead of interest. Mr Khan said his outlook was based on talking to customers who "are going back to their drawing boards, looking at projects and adjusting their business plans." Following a period of unprecented double-digit growth throughout 2007, when new issuances hit $60bn, investors rapidly lost their appetite for emerging market debt when the financial crisis hit. Many Sukuk were postponed when liquidity dried up and credit spreads widened. The issuance of new sukuk fell to $15.77 billion in 2008 compared with $46.65 in 2007, a 66 per cent year-on-year decline according to IFIS. Nevertheless, experts expect new issuances to resume double-digit growth once markets return to normal. uharnischfeger@thenational.ae
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Key developments in maritime dispute
2000: Israel withdraws from Lebanon after nearly 30 years without an officially demarcated border. The UN establishes the Blue Line to act as the frontier.
2007: Lebanon and Cyprus define their respective exclusive economic zones to facilitate oil and gas exploration. Israel uses this to define its EEZ with Cyprus
2011: Lebanon disputes Israeli-proposed line and submits documents to UN showing different EEZ. Cyprus offers to mediate without much progress.
2018: Lebanon signs first offshore oil and gas licencing deal with consortium of France’s Total, Italy’s Eni and Russia’s Novatek.
2018-2019: US seeks to mediate between Israel and Lebanon to prevent clashes over oil and gas resources.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”